The carbon electrodes for proton exchange membrane fuel cells have been modified by sputter deposition of poly(tetrafluroethylene) (PTFE). This technique produces fluorine containing functional groups on the carbon electrodes and thus forms a hydrophobic coating. The properties of the coated and uncoated carbon electrodes were investigated by contact angle measurements, electron spectroscopy for chemical analysis, and scanning electron microscopy. The results showed that sputter deposition of PTFE effectively modified the hydrophobic properties of the electrode surface. The improved hydrophobic properties can be interpreted by the additional functional groups grown on the carbon electrodes. The sputtered hydrophobic coatings showed much better uniformity than conventional spraying or dipping processes. Since only the top-sides of the electrodes were coated, the gas diffusion channels within the carbon electrodes can form a hydrophobicity gradient, which induced a capillary effect. As a result, the coated carbon electrodes repelled water more efficiently and the cell performance was enhanced, especially under high discharge rates or water flooding situations.